Manufacturing

Rolling along

By Matt McClellan

Print This Page

Send this page to a friend

The Timken file

Ward J. “Tim” Timken Jr. sees his name on every product his company manufactures, every contract the company signs and every business card handed out by one of his 25,000 employees. That’s why he always keeps in mind something his great-great-grandfather said: “Don’t ever put your name on something you’d ever have cause to be ashamed of.”

Tim Timken is the fifth chairman of the family-run, $4.9 billion manufacturer of anti-friction bearings and other steel products. Although the company has been publicly traded since the 1920s, The Timken Co. has managed to retain an atmosphere in which employees value the Timken brand like they were members of the tightly knit Timken family themselves.

“They say if you cut one of our people, they bleed black and orange — our company colors,” Timken says. “People understand that when they come to work for The Timken Co. they’re representing me, my name, my family’s name and the other 24,999 people that work for the company.”

Taking pride in your products results in higher quality, but even the best product will fail unless it’s part of a well-executed strategy. Timken has set the course for the company — a course that embraces change and the global economy.

“The key difference today, from a business perspective, is that we are acting more global,” Timken says. “We have manufacturing outside the U.S. and that has forced us to do a couple of things. One, the world is a heck of a lot smaller place than it was even 10 years ago. So from a speed point of view, decisions are made quicker, competitors react quicker and financial instability spreads quicker. So as a business, we have to be positioned to react quicker. That’s one of the key attributes for a global business today.”

The other key difference is complexity. Taking on the world isn’t easy.

“The fact of the matter is that we run a heck of a lot more complex business today than we did even 10 years ago — from a manufacturing footprint point of view, from a currency exposure point of view, from the number of customers — we are a lot more complex. We used to be a smaller, more North-America-driven type of company.”

Competing globally means being willing to make tough decisions. The Timken Co. has exited some markets and strengthened others through strategic acquisitions. The results have shown up on the balance sheet: In 2006, net income per diluted share was $2.36, among the highest in the company’s history, and sales were up while debt was down.

Here’s how Tim Timken expanded the horizons of a 108-year-old company to face the reality of a global economy.

Set clear goals

Up until the early 1980s, The Timken Co. had a business model in place that drove the company to be the world leader in tapered roller bearings and alloyed steel. Throughout that decade, The Timken Co. began to look beyond its core business. The company purchased a few small operations and pushed the boundaries around its core products but hadn’t made any drastic moves.

In the late ’90s, many of the company’s leaders were retiring. As the new chairman, Tim Timken and the rest of the new generation of leaders had a new direction for the company. The group re-evaluated what exactly the Timken brand stands for, and they decided it wasn’t just about the products — it was the knowledge behind those products that made The Timken Co. the industry leader that it is.

That realization set the stage for new geographic opportunities — and risks — as Timken expands the playing field.

“As we get larger, the bets get bigger, and the consequences of betting badly get bigger,” Timken says.

The process of adapting a company to global expansion starts with a vision. For Timken, the new vision created some momentous changes.

“It’s put us into parts of the market that we never would have thought about serving before,” Timken says. “It drives us to take products to market that don’t look a whole lot like a tapered roller bearing.”

The key to executing your vision on a worldwide scale is creating a communication structure that allows you to have instant contact with both the global management team and the global work force. Quick, precise communication lets you be both proactive and reactive to changes in the environment around you.

“It all starts with the strategy work you do to position your company, and then it cascades down from there,” he says. “Once you get your vision and mission for the company set, you define the strategy. You go from strategy into tactics, from tactics into business plans, business plans into individual performance plans.

“Throughout the whole communication chain, you have to make sure you are staying true to a core set of directions you’ve put in place for the company. If you do that well, the communications become a lot easier.”

Timken wants to make sure that every one of the company’s 25,000 employees knows exactly what role he or she plays in getting The Timken Co. to reach its goals. The strategies are translated directly to each individual so that everyone knows what he or she is supposed to do.

“They’re compensated on it through the metrics that we use in our compensation plans,” Timken says. “Ultimately, all of those will link back to the strategy and the vision for the company.

“We have annual compensation plans that have hard and soft metrics tied to them. Beyond the pure financial metrics, there are other ones that relate to quality, safety, environmental performance and penetration growth in certain geographies. It’s nothing all that fancy, but they’re all derived from the strategy we are trying to drive through the business.”

Of the employees who have been through the vision-training process, 98 percent of them were able to not only recite the company’s vision, but they were also able to explain what it meant and how it related to their jobs.

Create a work force of change

The Timken Co. is no stranger to the global stage. In fact, the company’s first foray overseas was a partnership with a U.K. company in the midst of World War I.

But there’s a difference between having global partnerships and customers and truly being a global company. Changing the mindset from a primarily national company to one that thinks about the entire planet has its own set of challenges, including resistance from long-time employees.

“You start with communication,” Timken says. “Make sure people understand what you’re trying to accomplish and how you plan to get there. The fact of the matter is that when you’re going through periods of change like we’ve seen in the last four or five years, there will be people who will not be able to make the change. That’s just a reality we have to face.”

He says there are three things to do when you run into resistance.

“Your first line is to make sure they understand what you are trying to accomplish,” Timken says. “The second line is to be more aggressive in coaching them to try to make the change. The final line is trying to find a different place for that individual, whether it’s inside the company in a different occupation or somewhere else.

“It’s difficult when you run a business and you know people extremely well, but, at the end of the day, if you have an element of your population that is resisting the change, that will do more harm than good. You have to address it proactively.”

But even when everyone is on board with your plan, it can still stress your internal resources as you race to keep up with global competition. New products being launched quicker means you have to take steps to keep your employee base equipped to handle the pace.

“You do it by a combination of internal training as well as hiring selected talents from the outside,” Timken says. “The fact is, there are products we’re making today that we wouldn’t have known anything about five years ago. So rather than going through the exercise of trying to acquire that knowledge ourselves and propagate it, we’ve found it’s often better served by somebody from the outside.”

And doing that may mean re-examining your hiring practices. “If you look at the history of our company, 20 years ago, we didn’t hire all that many people after they turned 21,” Timken says. “We wanted them right out of college; we wanted them to work for our company for 60 years and then retire. It’s not a model that works anymore — quite frankly for demographic reasons but also from strategic reasons. Our company is moving so quickly that you can’t afford the luxury of training everybody yourself.

“That has pushed us to be more active in midcareer hiring. At the end of the day, our company is better off for it. We’ve brought some talented people in later in life and used that hiring to fill critical gaps we have in our existing business but also the new businesses we’re acquiring.”

Recruiting is assisted by the reputation of the company and its commitment to the community, which is a form of brand building.

“Be very involved in the communities in which you operate,” Timken says. “Having a heavy presence in those communities makes you an attractive employer, which allows you to have the pick of the litter. Having strong relationships with universities in the regions you operate is critical.

“It goes back to the brand issue. When your brand is respected in the industries in which you operate, that gets around quickly. People understand the commitment that our brand has in the marketplace and are drawn to us.”

Use caution

In much the same way the company finds expertise outside the company to fill knowledge gaps, it uses strategic acquisitions to gather additional expertise, products and markets.

There are a few things to watch out for in any acquisition, and one of the most critical skills a leader needs to broker a successful deal is the discipline to push away from the table and say, “No, thanks.”

“It’s one of the hardest things in the world to do,” Timken says. “When you talk about a company of our size doing billion-dollar deals, with the margin of error, you can’t afford to make a mistake. The consequences are so significant for your shareholders and for your people. You have to go in with your eyes open, and you have to be willing to say, ‘Enough’s enough.’ That discipline is what has kept us alive for 108 years.”

Understanding the company you are planning to acquire is very important, but Timken also takes his managerial instincts into account before closing the deal.

“It’s a combination of very good due diligence and gut feel,” he says. “You can sit there and spend a lot of time going through data rooms and talking to customer bases, but, at the end of the day, the only way I get comfortable with an acquisition is if my gut tells me it’s a good fit culturally.”

The first thing Timken does in that opening gut check is decide whether he has faith in the people sitting across the table from him. Values play a large part in this decision. If he gets any sense that the leaders of the other company are willing to bend a few rules to get things done, the deal is off.

“Understand who you’re buying, understand the synergies created by the two businesses, and don’t give them away in the purchase price,” Timken says. “Our approach is always be very meticulous in due diligence. Do as much pre-close integration planning as possible, and don’t pay too much. The deals that blow up after close are really the result of somebody stretching too far to pay a price they can’t afford to pay.”

There are many paths to going global, but the reality is, you no longer have a choice. Change is coming. Those who embrace globalization will be positioned to succeed. Those who don’t will be in a tough fight.

“We are living in a world that is getting flatter, getting smaller,” Timken says. “We compete with more people around the world than we ever have in the past, and that creates a unique set of challenges that we as businesspeople have to proactively address.

“That’s something our company has done reasonably well in the last period of time. The pace of change will only increase. If you look at the implications of rapid growth of Asia on the global economy, I’m not sure we’ve seen the full extent of the impact that’s going to have — whether that’s on commodity pricing, who your customers are or who your competitors are. It’s a very dynamic environment right now. We all have to be flexible enough to deal with it, or you’re dead.”

HOW TO REACH: The Timken Co., (330) 438-3000 or www.timken.com